Uncertainty over government-led reforms remains an overhang for India despite its promising growth outlook and surging stock market, but India's former central bank governor says the factors for change are in place.
"India has often times failed in the past. It's punched below its weight," Dr. Duvvuri Subbarao, a former governor of the Reserve Bank of India (RBI), said at the Credit Suisse Asian Investment Conference Tuesday. But he believes it will be different this time as Indian Prime Minister Narendra Modi pursues reforms.
"There's been a remarkable turnaround in the India growth story, not so much because of what the new government has done, but because of what the new government is expected to do in the next 4-4.5 years," he said.
"For the first time in 30 years, we have a government that has no coalition pressures. It is assured of five years in office," he said, noting the ruling Bharatiya Janata Party (BJP) also has control of state governments accounting for more than 50 percent of the country's gross domestic product (GDP). Modi's BJP swept to power in May of last year with a solid majority of the parliamentary seats.
Momentum is strong
India has disappointed in recent years with economic growth falling to a decade low of below 5 percent, inflation running above 8 percent and reforms stalling.
But the Asian Development Bank expects the economy will take off, growing 7.8 percent over fiscal 2015-16 and 8.2 percent in fiscal 2016-17, boosted by an easing of monetary policy and a capital expenditure recovery.